NEW DELHI : The goods and services tax cuts were expected to bolster consumption across sectors, but failed to spark the expected revival for India's apparel and footwear retailers. An early Diwali, weak discretionary spending and erratic weather culminated in a lacklustre festive season for the two categories.

The uncertainty around the rate rationalisation led to deferral in purchasing decisions, said Amit Aggarwal, CFO of Bata India Ltd, the country's largest listed footwear retailer. "There was a delay in buying because of the planned rate rationalisation," he said, adding that the transition window from mid-August announcement to the 22 September rollout was "very, very long".

Many channel partners postponed purchases to avoid input tax credit (ITC) mismatches. "The moment the rates were announced, we saw a deferral in buying," Aggarwal said. Bata responded by reducing prices and launching incentive schemes early. "We were the first movers… passing on the GST-related benefits effective the first week of September," he added, despite the gross margin hit. Without the disruptions, Bata believes revenue would have been "at least flat" rather than the 4% decline reported.

The footwear maker's revenue declined 4.2% year-on-year to ₹801.33 crore in the September quarter. Its net profit also slipped from ₹51.97 crore to ₹13.89 crore.

GST on footwear costing up to ₹2,500 fell from 12% to 5% as the GST Council rationalized slabs from four to two: 5% and 18%. The GST overhaul for apparel simplified rates into two slabs of 5% and 18% and raised the price threshold for the lower 5% rate from ₹1,000 to ₹2,500, making budget and mass-market clothing cheaper. However, garments priced above ₹2,500 now attract 18% GST, up from 12%, which affected mid-premium and festive-wear categories.

"GST helped only in certain price bands. The mid-premium segment benefited, which favoured brands like Metro and Pantaloons. But low-priced footwear didn't gain because demand itself is weak, not the tax rate," said Satish Meena, founder of market research firm Datum Intelligence. "The divergence isn't because of GST alone — it's fundamentally brand-specific. Metro is doing well because it sells what consumers want today, while players like Bata are dealing with deeper relevance issues that go beyond tax changes."

Footwear maker Khadim India Ltd's September sales fell to ₹101 crore in the September quarterfrom ₹109 crore a year earlier. Premium lines like British Walkers grew in double digits, and products priced below ₹500 rebounded, but the mid-segment continued to struggle. The company said it expects the GST cut to gradually revive this category. "The GST cut should bridge the gap between the unorganised and organised sectors."

Even V-Mart Retail said the benefits of the GST cut did not materialize immediately in its lower-ticket categories. Lalit Agarwal, managing director and CEO of the company, said, "We expected significant gains, but the consumer response was not as strong as anticipated."

Tata Group-owned retailer Trent Ltd also cited muted sentiment, unseasonable rains and the GST transition as factors keeping growth to low single digits.

A Mirae Asset note on Trent said GST rationalisation should support demand in small-ticket discretionary categories in the coming months, but warned that slower revenue growth — despite a strong base last year — points to a broader consumption slowdown.

Premium pull

By comparison, premium footwear and apparel retailers such as Metro Brands and Aditya Birla Fashion & Retail Ltd (ABFRL) reported steadier demand and limited disruption from the GST transition.

Consumers intentionally waited for the GST cut before shopping, and demand accelerated meaningfully once the new rates kicked in, said Metro Brands CEO Nissan Joseph.

"We had prolonged monsoons through the quarter, and customers waiting on doing a major shopping for the GST benefits to take effect," Joseph said. After the cut, the impact was immediate: "The GST changes have been very positive for our business. We've seen as much as 11% reduction on footwear priced between ₹1,000 and ₹2,500 and around 6% for footwear under ₹1,000."

GST cuts benefited nearly 90% of Walkway and a large share of Metro and Mochi's portfolio, helping drive footfall and conversions. Joseph added that the broader consumption environment was normalising. "We have passed a lot of those things where you can see a certain normal trajectory of business come to light."

Metro also reported strong growth in e-commerce and remains optimistic about the second half.

ABFRL, which operates Louis Philippe, Van Heusen, Pantaloons and a large ethnic portfolio, did not witness the slowdown or GST-related deferrals that hit other apparel players.

"The overall demand environment remained largely in line with previous quarters with cautious consumer sentiment", Ashish Dikshit, managing director of ABFRL, said during the post-earnings call.

"The early onset of Pujo acted as a catalyst for apparel demand, driving higher footfall and improved conversions," he said. "This 5–6% increase in GST does not meaningfully shift consumer behaviour… at these price points, consumers don't move to value options."

Pantaloons delivered 7% like-to-like growth in the September quarter, and youth-focused brand OWND! grew 43% year-on-year, signalling stronger momentum than many peers. While rains in Kolkata and temporary shutdowns in the Northeast hurt footfall briefly, parent ABFRL said the overall festive season remained strong.

September was especially weak as consumers delayed purchases ahead of the GST rollout, said Karan Taurani, equity research analyst at Elara Capital. "A lot of the spends actually moved towards high-value items after GST… where the savings were much higher," he said, pointing to autos and white goods.

Taurani expects the benefit of GST cuts in apparel and footwear to materialise gradually.
"It will be a very small positive impact, in a phased manner over the next one year."

Cautious outlook

According to Ritu Srivastava, associate professor, economics at K J Somaiya Institute of Management, the benefit of lower GST was offset by thinner discounts. "The benefit from the GST cut was offset by the reduction in discounts," she said, noting that items above ₹2,500 saw no benefit due to unchanged higher tax rates.

The spillover of Durga Puja into the previous quarter and an early Diwali led to fragmented spending. Retailers described this as a "summer Diwali" effect that hurt heavier festive wear.

E-commerce has reshaped shopping patterns, said Srivastava. "Online marketplaces significantly influence timings and prices… consumers are buying well before the festival week."

Heavy rains in the East and cyclonic activity in Tamil Nadu and Andhra Pradesh further pulled down footfall during key festive days. Retailers were forced to roll out deeper discounts early in the season to clear inventory, squeezing margins.

While analysts expect some recovery in the third quarter, the outlook is cautious. Growth will be "mildly better" but limited by competitive intensity and the relatively small wallet share for fashion categories, said Taurani . "We don't see a big spurt in growth and demand."